NCPA - National Center for Policy Analysis


July 7, 2005

When two Chicago Sun-Times reporters went shopping at a number of retail outlets, they discovered the costs didn't quite add up. Some products were overtaxed while others were undertaxed. The problem is not the merchants but the complex and confusing state sales tax, says the Sun-Times.

If a product is considered a medicine it's taxed at a different rate, 1 percent, compared with 6.25 percent for other items. But what constitutes a medicine? Sometimes it's hard to figure that out. For example:

  • Medicated Noxzema shaving cream is taxed by the state at the 1 percent rate while Barbasol shaving cream is taxed at 6.25 percent; the difference is the word medicated.
  • Chapstick Disney Princess Lip Balm has a lower tax than Equaline petroleum lip treatment because it uses the word "balm."

On top of this, retailers don't always seem to know how to apply the tax properly:

  • Two Sun-Times reporters found they were overtaxed on some items -- 26 cents for the Aveeno baby bath and 13 cents for Sav-On Osco rolled sterile gauze.
  • They were undertaxed on others -- 8 cents on Tropicana grape beverage and 7 cents on Equaline petroleum lip treatment.

"Merchants say Illinois is viewed as, hands down, the most complicated sales tax system in the country," says Robb Carr, of the Illinois Retail Merchants Association.

Some say the answer to the confusion is to tax everything at the same rate, but that would raise costs of food and medicine. The real solution is to simplify sales tax definitions so retailers know exactly how to apply them. And stores should post the taxes for consumers. We need to know exactly what we are paying for, says the Sun-Times.

Source: Editorial, "Consumers need solution to state's taxing problem," Chicago Sun-Times, July 6, 2005.


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